Dental Due Diligence: A Bite-Sized Guide
Key contact: Jon Lawley
Author: Joe Smith
As anyone who has bought a dental practice will attest, there are myriad steps to the process. But the due diligence exercise is arguably the most important – and the most time-consuming.
The due diligence exercise allows the buyer to thoroughly investigate the target dental practice, flagging any potential issues early in the transaction lifecycle.
The onus is often on the buyer’s solicitors to initiate the process by providing the seller’s solicitors with a due diligence questionnaire. This document be anything from just a few pages long to fifty pages plus, depending on the transaction.
The seller will begin to collate their documents and responses to the questionnaire, storing the information in a secure online “data room” only accessible by the parties and their advisers. The number of documents likely to be requested means that the seller must be well organised to avoid delaying the due diligence process.
Among the many documents the seller may be required to provide are:
- Evidence of General Dental Council (GDC) registration for all relevant employees, self-employed persons and associates
- Where applicable, a full copy and details of the NHS contract
- Maintenance contacts in respect of dental equipment (for example, compressors, auto-claves, and x-ray machines)
- The Care Quality Commission (CQC) certificate for the practice and any CQC inspection reports
- Details of any patient complaints, disputes, or litigation
- Details of any hire agreements relating to dental equipment
- Details of any independent capitation scheme (for example, Denplan or DPAS)
- Copies of any leases and risk assessments in connection with a property (for example, fire risk assessments, legionella reports, asbestos, and so on)
- Employment contracts and agreements for any self-employed persons or associates
- Details and full copies of all commercial contracts relating to the practice
- Copies of all appropriate insurance policies relating to the practice and professional indemnity certificates for the dental staff
- Practice accounts
- An inventory of all fixtures and fittings included in the sale.
The above list is certainly not exhaustive of all the information and documents potentially requested by the buyer, depending on their needs.
Following disclosure of the initial due diligence documents, a due diligence report is usually drafted by the buyer’s solicitors and sent exclusively to the buyer for review. Although these reports can be weighty, it is crucial for buyers to read them properly. The buyer’s solicitors will highlight any issues contained within, which often form the basis of any additional enquiries that are subsequently raised by the buyer and their legal team.
If the buyers find any aspects of the provided material concerning or key issues are discovered during the due diligence review, the buyer may pursue a reduction in the purchase price or seek to obtain further protection in the sale agreement in the form of warranties or indemnities. If these issues are extreme, the buyer may even pull out of the purchase.
How can Acuity help?
When you buy or sell your dental practice with Acuity Law, you put yourself in the safest hands. As the largest dedicated dental M&A team in the UK, our wealth of knowledge in dental transactions will smooth the due diligence process, making it easier to navigate and tackle.
Plus, our Acuity Client Portal gives you instant access to your matters, documents and a comprehensive knowledge bank at the click of a button.
For more information, contact Corporate Healthcare Partner Jon Lawley at [email protected]